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Dark clouds loom for VMware as server market slows

Alex Scroxton

Concerns surrounding slowing growth in server shipments during the coming 12 to 15 months have put a dampener on otherwise positive third quarter numbers for VMware.

Speaking on a conference call, CEO Paul Maritz said VMware was currently planning for a sequential revenue decline heading into Q1 2011, noting: "This is consistent with cycles commonly seen in enterprise software."

"As we go through our 2011 planning cycle it will be a year of significant investment, with little if any operating margin expansion. So we will have a tough revenue comparable from 2010, and inherently limited visibility at this time," said Maritz.

"I believe we can deliver 20% growth in 2011. I will provide more information in January after we report our Q4 results, and have completed our 2011 go to market plans," he said.

Third quarter profits and sales at VMware have surged once again as the move towards virtualisation solutions and redeployment of ICT in the cloud continues to dominate the  agenda.

For the three months to 30 September, the virtualisation whizzkid posted total sales of $714m (£453.7m), up 46% over this time last year, while GAAP net profit ballooned by well over 100% year-on-year to $85m, well ahead of Wall Street's expectations.

License sales accounted for $343m of revenues, while software maintenance and professional services raked in $371m.

CFO Mark Peek predicted Q4 sales of between $790m and $810m. The vendor has $2.9bn in cash and deferred revenues of $1.5bn, up 52% year-on-year.

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